Canada’s central bank is adding another data point to show the extent of real estate investors. A Bank of Canada (BoC) staff report looked at the country’s mortgage market up to Q2 2021. They found over 1 in 5 recently issued mortgages in Canada went to investors. The data reveals a sharp increase, but even looking at the long-term trend, investors have been a significant buyer for the past half-decade.
Over 1 in 5 Canadian Mortgages Are Issued To Investors
Canadian investors are growing their already massive share of mortgage debt. BoC staff found investors are behind 21.6% of mortgages issued in Q2 2021. Their share was just 19.0% for the long-term average, defined as 2014 to 2021 H1, by the central bank in this case. It was a substantial share climb, especially contrasted with the long-term trend.
It’s worth taking a second to discuss their long-term comparison period. It happened to be just a few quarters before Canada was declared an exuberant real estate market. As big as the climb in share is, it was likely smaller prior to the chosen long-term dates.
Investors Are Behind Over 1 In 5 Mortgages For Toronto Real Estate
Toronto real estate is notorious for its investor-heavy market, and the data reflects it. Investors represent 23.1% of mortgages issued in Q2 2021, up from the 21.3% long-term average. Over 1 in 5 mortgages in the region have been going to investors for at least six years. The data understates investors, with the land registry showing a bigger share of investors.
Vancouver Real Estate Is Also Being Scooped Up By Investors
Vancouver real estate is also one of the leading markets for investors. Investors represented 20.4% of new mortgages in Q2 2021, up from the 19.0% long-term average. Just over one point might not sound like much, but considering the surge of mortgages in this period it was huge.
Once again, it’s worth emphasizing this is mortgage data from the credit bureau. Toronto and Vancouver have large private mortgage markets that wouldn’t show here. In Toronto, private lenders were capturing billions in debt pre-pandemic. Still, 1 in 5 mortgages to investors is a significant data point by itself.
Ottawa Has The Largest Share of Mortgages To Investors In Canada
Ottawa real estate is one of the more surprising cities on the list — not because it’s not an attractive city. It just doesn’t stand out as the most attractive city for investors, like the BoC data shows. Investors were behind 25.5% of new mortgages in Q2 2021, up from the 20.4% long-term average. Over a quarter of new mortgages issued were going to investors, up from a fifth. It was a colossal share, and it became even larger.
Halifax Mortgages Have Seen The Fastest Investor Growth
Halifax real estate showed the biggest jump in its share of mortgages to investors. Investors were behind 19.0% of mortgages in Q2 2021, Up from the 14.7% long-term average. The market showed a 29.3% jump, a considerable deviation from the norm. A significant migration from Ontario to Atlantic Canada is worth mentioning here. Local investors may have seen an opportunity to cash in on a demographic used to higher rents. More data is needed to figure out what’s driving this trend in Halifax though.
It’s worth noting the methodology used by the BoC is likely to downplay the share of investors, as high as it is. An investor in this case fits the following criteria:
- Held multiple mortgages.
- Either maintained their primary residence or migrated to a new one while keeping the old one.
- Are found in a TransUnion consumer credit database.
An investor who paid off their primary residence and bought a second home would be excluded. Ditto with secondary purchases made with alternative financing such as a private lender. That would exclude billions of dollars in private or all-cash investments in just the Greater Toronto Area.
Using personal credit data also excludes corporate purchasers, common for investment properties. Even so, the data shows Canada’s ultra-low rate environment has diverted significant capital from the real economy, and has become problematic.